NGPF Personal Finance – Investing Practice Test

Investing a fixed dollar amount on a regular schedule is dollar-cost averaging. The idea is to commit to investing the same amount of money at set intervals, no matter what market prices are doing. When prices are high, you buy fewer shares; when prices are low, you buy more shares. Over time, this can lower your average cost per share and reduce the risk of investing a large lump sum just before a drop. It also helps remove emotion from investing and encourages consistent, long-term saving. This concept is different from market indexes (benchmarks used to measure performance) or expense ratios (annual fund fees), and ROI simply measures how much you’ve earned on an investment. Dollar-cost averaging is especially useful for building wealth gradually and avoiding attempts to time the market.